FM Issue: Energy Disclosure

March 30, 2015

Energy Disclosure Legislation May Be On The Way

Photo: Stockbyte

By Tad Radzinski, P.E., LEED AP, SFPFrom the March/April 2015 issue

As the global economy evolves, industrialization and urbanization are expanding. This has become a cause for concern as the world strives to meet the needs of today while preserving the resources of tomorrow. In 2013, commercial and residential buildings accounted for 40% of the total energy consumption in the United States, costing over $200 billion and generating 45% of national greenhouse gas emissions. In New York City alone, 80% of its carbon footprint comes from building operations.

With energy costs continuing to rise and environmental considerations becoming a common focus, existing buildings are increasingly recognized as a significant opportunity to reduce impacts. In an effort to address one of the leading sources of impact, multiple states and some of the country’s largest cities have enacted energy disclosure legislation. What is energy disclosure, and how does it affect facility executives?

Energy Benchmarking Versus Energy Disclosure

First, the difference between energy benchmarking and energy disclosure should be clarified. Energy benchmarking is the process of collecting and analyzing utility use internally. Normally, benchmarking provides baseline performance data that can be used to compare energy and other resource use over time. There are many applications for energy benchmarking data, including identifying inefficiencies, monitoring improvements, optimizing building schedules, and so on. Benchmarking allows facility professionals to understand and operate their buildings better.

Energy disclosure uses energy benchmarking to gather building performance data, but then requires that certain energy metrics be reported and made publicly available. Typically resulting from legislation, the intent of energy disclosure is to establish standardized baselines for comparing building performance in commercial and residential markets. With performance data readily available, building owners, and the public, can see how certain properties perform compared to similar buildings. Adding a new dimension to real estate decisions, energy disclosure creates competition among owners to increase efficiency and meet demand for high performance buildings. As a result, energy disclosure legislation promotes collective energy efficiency improvements across the building market.

There are two different models for energy disclosure: asset ratings and operational benchmarks.

Similar to MPG ratings for vehicles, asset ratings measure typical or as-built operating behaviors and conditions. For buildings, this is accomplished through a low-grade energy model that uses inputs such as building vintage, envelope design, lighting design, and heating/cooling system design to provide some kind of score. Actual utility data does not affect asset ratings.

Operational benchmarks, on the other hand, use actual utility data over a specific performance period (usually 12 months) to deliver a standard metric for comparison with similar buildings. Operational benchmarks provide an accurate representation of performance and can identify inefficiencies that were not represented by an asset rating alone. For this reason, operational benchmarks have emerged as the preferred method of energy disclosure for legislative bodies across the United States.

Early 2015 additions to policies across the U.S. were Berkeley, CA adopting a benchmarking ordinance and Philadelphia, PA expanding its existing energy benchmarking program to include multifamily facilities over 50,000 square feet. (Image: Institute for Market Transformation (www.imt.org))

Energy Disclosure Legislation

To date, the United States has not passed nationwide requirements for energy disclosure; however, many states, cities, and municipalities have enacted energy disclosure legislation over the past few years. Although each city and state has different regulations in place, several similarities are apparent across most programs. In each case, current laws designate the building types and sizes for which owners will be required to benchmark and disclose their ratings. Most often, government, commercial, manufacturing, and multi-family facilities are required to disclose energy use.

Complying With Disclosure Regulations

Although specific regulations differ, preparing for and complying with their requirements is fairly universal. First, facility owners and managers will need to understand if their building qualifies under the disclosure legislation. In most cases, governing bodies reach out to applicable building owners to inform them of their disclosure requirements; however, facility management professionals should review the relevant laws in their area to verify if a building must comply. If required, or if it is believed that energy disclosure legislation will affect the building in the future, operators need to start collecting, organizing, and uploading performance data.

What information do I need to gather? The focus of energy disclosure legislation is obviously energy performance and utility usage. In many states, cities, or municipalities, utility data is the only metric that will be needed to track and disclose; however, some laws require further disclosure of water use or other metrics. This data is usually required for a 12 month period. Specific requirements are spelled out at the www.buildingrating.org website or the local municipality’s website. It is recommended to gather as much information as possible when benchmarking regardless of disclosure requirements. Informed facility managers can better operate their properties and improve overall efficiency.

Energy disclosure legislation across the United States solely utilizes ENERGY STAR Portfolio Manager to collect and disclose energy performance data. This is a free online tool developed by the Environmental Protection Agency for use in ENERGY STAR benchmarking and certification. Beyond submitting utility use data, there are several factors used to calculate and compare energy performance. Facility managers will also need specific information about their buildings, including: square footage, occupancy, space types and breakdowns, operating hours, number of computers, living units and bedrooms (for multi-family properties), etc. Portfolio Manager uses this information to standardize data submission and calculations, enabling accurate scoring and comparisons among like buildings.

How can I get the information I need? The easiest place to start gathering information is the building’s utility bills. The information found on electricity, water, steam, and gas bills can be easily uploaded to Portfolio Manager and tracked over time. Even if a facility is only required to disclose electricity use, collecting data on all of the utilities will paint the clearest picture of current performance. Other resources for assembling building specific information can include building automation systems, drawings, contractor reports, and even permit applications. Using questionnaires or tenant interviews, facility managers can collect needed information on operating hours, number of computers, and full-time employee/occupant counts. When first collecting data, it is recommended to set up a system for collecting this information throughout the year to aid in the following year’s disclosure.

Is there anyone that can help me comply with regulations? There are many facility professionals that choose to go it alone to benchmark and disclose building energy performance. While this approach may work for some, others seek assistance in both complying with energy disclosure legislation and taking a further step toward improving operating efficiency. For the latter, there are many sustainable buildings and operations consultants that offer compliance services. Consultants use their experience and fresh perspective to turn disclosure mandates into a valuable opportunity for building owners and managers.

There is a wide range of expertise and associated cost among consultants, so it is important to find the best fit. Some firms will merely collect and submit data for disclosure, while others will provide additional services including identifying energy conservation measures, submitting for ENERGY STAR certification (if applicable), conducting energy audits, or performing more comprehensive building conditions assessments. With the relative standardization of energy disclosure legislation nationwide, experienced consultants have the ability to work in any market, leveraging their expertise to offer the best return on investment.

Burden Or Opportunity?

Energy disclosure allows building owners to promote energy efficiency successes and distinguish themselves from the competition. Studies have shown that, in some cases, buildings that make sustainability and energy performance priorities have higher tenant retention rates and rental premiums. The process of benchmarking operations also provides facility professionals the tools and insight to reduce operating expenses and realize bottom line savings through improvements in energy performance.

Most importantly, energy disclosure ultimately leads to more sustainable buildings. The market advantage that can stem from energy disclosure drives innovation and overall energy efficiency improvements. Green buildings provide a cleaner, healthier environment and make regions and communities more competitive in the real estate market. Progressive businesses are increasingly looking for sustainable commercial spaces, and organizations such as the General Services Administration (GSA) have begun to set minimum energy performance requirements for potential leases.

With the proper approach, rather than being a burden on facility owners and managers, energy disclosure can actually be a significant opportunity to reduce costs and generate revenue.

Energy disclosure legislation is gaining traction across major municipalities and progressive states, and some municipalities have even taken it a step further to foster increased energy efficiency. For instance, New York City has passed additional legislation (Local Law 87) requiring annual energy audits of commercial buildings, identifying equipment retrofits and energy conservation measures. The legislation in New York City is leading the way to more vigorous programs as other municipalities feel a greater urgency to address environmental issues. One thing is certain… energy disclosure is here to stay, and proactive facility management professionals stand to benefit.

Radzinski

With 30 years of practical experience, Radzinski is an expert in corporate responsibility and environmental management. Through consulting, training, and speaking, he has provided hundreds of organizations the insight and tools to revolutionize their business through successful sustainability strategies. Radzinksi is co-founder and president of Sustainable Solutions Corporation. He is an adjunct professor at Villanova University, where he was instrumental in the development of the Master of Science Degree in Sustainable Engineering. He also serves as the Chief Certification Officer at GreenCircle Certified, LLC, providing third-party verification of environmental claims.

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